[00:00:06] Speaker 02:
May it please the court?

[00:00:08] Speaker 02:
Good morning.

[00:00:09] Speaker 02:
My name is John Wright.

[00:00:10] Speaker 02:
I represent the appellant Twin Rock.

[00:00:12] Speaker 02:
And I'd like to reserve three minutes for rebuttal, if I may.

[00:00:14] Speaker 01:
If you're on the clock.

[00:00:15] Speaker 02:
OK.

[00:00:16] Speaker 01:
You know we watched that.

[00:00:18] Speaker 01:
Yes, I do.

[00:00:18] Speaker 01:
All right.

[00:00:19] Speaker 01:
Thank you very much.

[00:00:21] Speaker 02:
Your honors, the crux of this case and any of the ancient lien law cases is determining when the debt became wholly due and fixing that date.

[00:00:34] Speaker 02:
And there are different theories in this case presented as to what that date might be.

[00:00:41] Speaker 02:
One of them we were not able to actually establish simply because the case was dismissed on a motion dismissed before we can conduct any discovery.

[00:00:48] Speaker 02:
One of the issues in this is that the district court determined that the

[00:01:00] Speaker 02:
State of the notice of default, the first notice of default before the most recent sale that happened during the litigation, was the starting point, at least, of the acceleration in this case.

[00:01:13] Speaker 02:
Now, the Nevada Supreme Court has stated, not succinctly, but at least alluded to, it said for the sake of argument, that an acceleration is the same thing as becoming wholly due.

[00:01:25] Speaker 02:
So in this case, go ahead.

[00:01:27] Speaker 01:
Sure.

[00:01:27] Speaker 01:
Are you saying in Kessler that's what they said?

[00:01:31] Speaker 02:
That's not actually in Kessler.

[00:01:32] Speaker 02:
It's an SFR investment pool, 138 Nevada, Advanced Opinion 22.

[00:01:38] Speaker 01:
But didn't the Supreme Court in Nevada make it clear that the filing of a bankruptcy does not render an obligation wholly due?

[00:01:50] Speaker 02:
No, actually what the Supreme Court said was that the discharge did not.

[00:01:55] Speaker 02:
And they specifically withheld theorizing on the filing of the bankruptcy.

[00:02:01] Speaker 02:
which is interesting because of the case law that we presented concerning that issue.

[00:02:07] Speaker 02:
There's bankruptcy courts from around the country.

[00:02:10] Speaker 02:
Some of them said that acceleration occurs at the discharge.

[00:02:12] Speaker 02:
Other ones said that acceleration occurs at the filing.

[00:02:16] Speaker 02:
And so this Supreme Court, because it wasn't in Kasseler, it wasn't brought up in the lower court, declined to rule on whether or not the filing of a bankruptcy would accelerate the debt.

[00:02:27] Speaker 01:
And would that make a difference in this case?

[00:02:29] Speaker 01:
Bottom line is, they're saying it doesn't become wholly due.

[00:02:34] Speaker 01:
Your whole case depends on when it becomes wholly due, right?

[00:02:38] Speaker 02:
Yeah, any H.E.

[00:02:39] Speaker 02:
Ling case depends on when it becomes wholly due.

[00:02:41] Speaker 01:
Absolutely.

[00:02:41] Speaker 01:
And your best argument is what?

[00:02:43] Speaker 02:
Well, the best argument is that we haven't been able to get there yet because, but I'll explain.

[00:02:48] Speaker 02:
Something that happened since the briefing in this case, at least before the reply brief, and I honestly didn't pick up on this, but there was a case out of the Nevada Supreme Court.

[00:02:57] Speaker 02:
It's the L.V.

[00:02:58] Speaker 02:
debt.

[00:02:58] Speaker 02:
The L.V.

[00:02:59] Speaker 02:
debt case.

[00:02:59] Speaker 02:
Thank you.

[00:03:00] Speaker 02:
The LV debt case where the Supreme Court now says that a recorded notice of default does not accelerate because inherently they are ambiguous because of the mandatory language

[00:03:15] Speaker 02:
of 107080 that says, hey, you've got this 35-day right to cure.

[00:03:21] Speaker 04:
Isn't that a big problem for you?

[00:03:22] Speaker 02:
Well, it's a problem for everybody, because then when did it accelerate?

[00:03:26] Speaker 04:
Well, maybe whatever the date is doesn't run the 10 years.

[00:03:34] Speaker 04:
If it's not the original filing, then what could it be?

[00:03:38] Speaker 02:
Exactly the point, because if you follow all the case law, Clayton says that the acceleration has to be clear and unambiguous.

[00:03:47] Speaker 02:
So how could just the passage of 35 days after the recording of a notice of default, which they've already said is

[00:03:55] Speaker 02:
ambiguous and doesn't accelerate, how could simply adding 35 days of time and passage and nothing happening in between or thereafter then cause an acceleration?

[00:04:04] Speaker 02:
There has to be an acceleration going into the foreclosure because you only foreclose once, you foreclose on the entire debt.

[00:04:11] Speaker 02:
The notice of default and the notice of sale are the only two recorded documents that are required to conduct a nontraditional foreclosure.

[00:04:19] Speaker 02:
They both state that the full amount of the debt is due.

[00:04:23] Speaker 02:
Right.

[00:04:24] Speaker 02:
They say all payments from the date of the default, which, by the way, was August of 2009, is included.

[00:04:33] Speaker 02:
All the payments that were before that and all the payments afterwards.

[00:04:36] Speaker 02:
And they generally put a lump sum down.

[00:04:39] Speaker 02:
By the time you get to the notice of sale, it's up to 365 grand.

[00:04:42] Speaker 04:
But isn't the possible answer to that that under Nevada law, the ancient lien statute imposes

[00:04:53] Speaker 04:
for these things to disappear of very, very, very high bar, taking out of the equation any doubt of any kind.

[00:05:03] Speaker 04:
That seems to me to be what the Supreme Court said, the Supreme Court of Nevada said in that case.

[00:05:09] Speaker 04:
And irrespective of what their law is as to how exactly you get to a judicial foreclosure to employ the ancient lien statute, which is very draconian,

[00:05:20] Speaker 04:
You you have this incredibly high standard and it's just not met here.

[00:05:25] Speaker 02:
Well, no, I don't think so because of Monterath said that the the language of 106 240 is plain and unambiguous that a right secured by a lien or deed of trust or mortgage is terminated.

[00:05:39] Speaker 02:
after the 10 years for become holy do.

[00:05:42] Speaker 02:
There's nothing in that that said, but if this, but if that, or we take into equitable considerations, it's that it's plain and unambiguous.

[00:05:50] Speaker 02:
There's no reason to go outside the four corners of that statue.

[00:05:52] Speaker 01:
You don't think that the Supreme Court in Nevada

[00:05:55] Speaker 01:
views that differently than you do?

[00:05:58] Speaker 02:
They haven't, certainly haven't said so and they've had plenty of opportunity to do so, but I will say this, what they did say at LV debt was because the notice of default is not the triggering mechanism, I'm throwing in that language, but you have to go back to the language of the debt instrument itself.

[00:06:17] Speaker 04:
But what they say going to Judge Smith is the purpose, and I'm going to not

[00:06:24] Speaker 04:
quote the number, the ancient lien statute is to clear titles of old and obsolete mortgages.

[00:06:31] Speaker 04:
It should go without saying that a deed of trust that is the subject of pending litigation is neither obsolete nor inactive and it just seems to me that that doesn't

[00:06:44] Speaker 04:
translate into the actual foreclosure, it's just saying you need beyond a reasonable doubt sort of facts and it's really hard to get there in Nevada.

[00:06:57] Speaker 02:
Well, except that

[00:07:00] Speaker 02:
Then they say, when there is no recorded extension of the due date, the terms of the mortgage or deed of trust dictate when the debt becomes wholly due.

[00:07:09] Speaker 02:
So if you were to look at the deed of trust in this case, just like almost all of them, they have the exact same type of language.

[00:07:17] Speaker 02:
It says, look, there's a list of things that are going to take place before the notice of default.

[00:07:24] Speaker 02:
And one of those things is,

[00:07:26] Speaker 02:
that there's the banks going to make a determination of whether or not it has accelerated the debt.

[00:07:32] Speaker 04:
Yeah, but even here, the documents that you're looking at had at the very least ambiguous language as to an opportunity to cure, right?

[00:07:45] Speaker 04:
Oh, you mean the deed of trust?

[00:07:46] Speaker 04:
Well, the acceleration notice.

[00:07:49] Speaker 02:
No, because the deed of trust requires, number one, it has its own 30-day cure period as well.

[00:07:55] Speaker 02:
But it states in its paragraph 22 of the deed of trust, it states that there will be notices sent out and there will also be a determination of acceleration.

[00:08:08] Speaker 02:
It says that a failure to cure may result in

[00:08:13] Speaker 02:
I think that's what we're looking at.

[00:08:15] Speaker 02:
I think that's what we're looking at.

[00:08:17] Speaker 04:
Acceleration in our experience when we actually go back and I haven't get a chance to do it in this case because the motion does what I'm looking at is the 2010 breach notice that are one 90 and then continuing to one 91 that has on one 91 and notice you may have the right to cure the default here in and reinstate the

[00:08:41] Speaker 04:
and of Nevada said makes it makes these things ambiguous enough that it takes it outside the ancient lean statute.

[00:08:51] Speaker 02:
Yes, however, they're speaking to and you're you're looking at.

[00:08:55] Speaker 02:
the recorded notice of default and that inherently is going to have that problem because of the mandatory language of 107 what I'm saying is is before you ever get to that the debt is accelerated because of the the language of the.

[00:09:11] Speaker 02:
Dita Trust tells us that certain steps are going to be taken by the bank prior to it recording the notice of default.

[00:09:19] Speaker 02:
And those necessarily would include acceleration.

[00:09:22] Speaker 02:
The notice of default doesn't accelerate.

[00:09:25] Speaker 02:
It's evidence that it's already been accelerated.

[00:09:27] Speaker 01:
Well, with respect, I'm not reading your Supreme Court case that way.

[00:09:34] Speaker 01:
They're trying to find what holy do means.

[00:09:36] Speaker 01:
And as my colleague has quoted, they're basically saying,

[00:09:40] Speaker 01:
Hey, like, as long as there's a chance for redemption, as long as there's litigation involved and so on, it's not wholly due.

[00:09:47] Speaker 01:
This statute was designed to basically clean up the public lien docket of truly ancient liens.

[00:09:54] Speaker 01:
Nobody's around, no beneficiaries.

[00:09:56] Speaker 01:
No debtors, no anybody, they just want to clean it up.

[00:09:59] Speaker 01:
You don't have that here.

[00:10:00] Speaker 01:
Well, how does this situation qualify as being wholly due under the statute?

[00:10:07] Speaker 02:
So to what you're saying then, correct me if I'm wrong, is you're saying that an acceleration is simply not being wholly due?

[00:10:15] Speaker 01:
Well, yeah, again, as interpreted by the Supreme Court, I mean, I used to practice real estate law for a long, long, long, long time.

[00:10:21] Speaker 01:
Admittedly, it was in California.

[00:10:23] Speaker 01:
We had the same thing there.

[00:10:25] Speaker 01:
The reality is different language.

[00:10:26] Speaker 01:
But the reality is you got all kinds of statutory protections to protect the debtor.

[00:10:31] Speaker 01:
You have bankruptcy provisions.

[00:10:33] Speaker 01:
And the Supreme Court of Nevada, as I read it, is simply saying, look, as long as there's a possibility here of renewing this, reinstating this in some way, this is not wholly due.

[00:10:47] Speaker 01:
If you look at the exact language of the note, I get it.

[00:10:50] Speaker 01:
I get it.

[00:10:50] Speaker 01:
Because we always put all that language in it.

[00:10:52] Speaker 01:
If you do this, you're dead.

[00:10:53] Speaker 01:
But it doesn't mean anything in real time.

[00:10:57] Speaker 01:
And I think that's what we've got here, do we not?

[00:11:00] Speaker 02:
I think that that creates an impossibility of ever having an acceleration because... It's rare, as my colleague pointed out.

[00:11:07] Speaker 01:
It's very rare.

[00:11:08] Speaker 01:
To have an acceleration?

[00:11:09] Speaker 01:
To have a holy do.

[00:11:12] Speaker 01:
It's accelerated, but it's limited by the statute.

[00:11:15] Speaker 01:
It's limited by bankruptcy laws.

[00:11:17] Speaker 01:
That's the problem.

[00:11:18] Speaker 01:
As long as you have those rights, which arguably is what happened here,

[00:11:23] Speaker 01:
It's not wholly due in the terms that it disappears, as you're saying.

[00:11:27] Speaker 02:
Well, then what you're saying then is that the maturity date in the original note is the only time that it could be wholly due.

[00:11:36] Speaker 02:
No, no.

[00:11:38] Speaker 01:
If all of the protections of the statute, including the bankruptcy code, have been satisfied, then it can be wholly due.

[00:11:45] Speaker 01:
But in the meantime, as long as it's being litigated, there's a chance of redemption.

[00:11:50] Speaker 01:
Notwithstanding what the note says,

[00:11:52] Speaker 01:
The Dita Trust says it's not wholly due under Nevada law.

[00:11:57] Speaker 02:
Well, no, because the problem with that, it flies in the face of the clear language of 106-240, which says that it's controlled by the instrument itself.

[00:12:06] Speaker 04:
But we're not reading, we're not allowed to read the statute without the binding gloss put on it.

[00:12:16] Speaker 04:
by the Nevada Supreme Court.

[00:12:18] Speaker 04:
For our purposes, the statute means what the Nevada Supreme Court says it means, right?

[00:12:22] Speaker 02:
Then I would go back to Monterath, where the Nevada Supreme Court said the language is plain and unambiguous.

[00:12:29] Speaker 02:
If it sits for 10 years after it becomes wholly due, it is terminated.

[00:12:33] Speaker 02:
It's not a presumption.

[00:12:35] Speaker 02:
The debt is terminated.

[00:12:36] Speaker 02:
There's a presumption concerning

[00:12:38] Speaker 02:
the manner of that in terms of whether or not it was paid or not.

[00:12:42] Speaker 02:
But it's mandatory, it terminates.

[00:12:45] Speaker 02:
And, you know, there's always, bankruptcy is always an option.

[00:12:49] Speaker 02:
Even if there was maturity of the note and they began to foreclose.

[00:12:55] Speaker 02:
Again, where does bankruptcy not become an option unless they filed within, you know, seven years prior?

[00:13:00] Speaker 02:
So that would say that there's always a contingency.

[00:13:04] Speaker 02:
So if it doesn't happen, and the notice of default doesn't accelerate, there's no event that takes place afterwards, neither in the deed of trust itself, nor in Chapter 107, that would create the acceleration, which allows the foreclosure.

[00:13:22] Speaker 01:
We seem to be going around in circles.

[00:13:24] Speaker 01:
Let me just ask you about the list pendants issue.

[00:13:26] Speaker 01:
Yes.

[00:13:27] Speaker 01:
You're claiming that Trinrock was a bona fide purchaser.

[00:13:32] Speaker 01:
A list penance had been filed.

[00:13:35] Speaker 01:
What is your argument that someone can become a bona fide purchaser when there is a list penance of record?

[00:13:42] Speaker 02:
Well, the problem with that is that the list penance is just an indication that there's an action pending at that point.

[00:13:49] Speaker 01:
Regarding that property.

[00:13:50] Speaker 02:
Regarding that property, exactly.

[00:13:52] Speaker 02:
the action had actually terminated at that time.

[00:13:55] Speaker 02:
There was a time where there was no action.

[00:13:56] Speaker 02:
I'm sorry?

[00:13:57] Speaker 01:
It was still recorded.

[00:13:59] Speaker 02:
It was still recorded, but it's a recording of an action that doesn't exist anymore.

[00:14:04] Speaker 02:
I mean, I understand.

[00:14:05] Speaker 01:
You're saying that the fact that there's a list pendants recorded, if the underlying action has been dismissed and that's not indicated in the record that the list pendants is valueless for purposes of determining whether someone is a bona fide purchaser for value?

[00:14:19] Speaker 02:
Well, I would say so because, well, first of all, normally speaking, the Liz pendence is stricken as part of the order.

[00:14:27] Speaker 02:
It wasn't done in this case.

[00:14:29] Speaker 02:
Right.

[00:14:29] Speaker 02:
But is that the problem?

[00:14:32] Speaker 02:
Yes, I understand.

[00:14:33] Speaker 02:
However, again, the Liz pendence is only a notification of the pending action.

[00:14:39] Speaker 02:
There is no pending action.

[00:14:42] Speaker 02:
So it's a tree falling in the woods.

[00:14:43] Speaker 02:
Nobody's there to see it.

[00:14:44] Speaker 02:
It doesn't happen because the action is gone as a matter of fact.

[00:14:49] Speaker 01:
But with respect, counsel, you're an experienced lawyer.

[00:14:53] Speaker 01:
You look at the public record.

[00:14:54] Speaker 01:
There may be all kinds of things there.

[00:14:56] Speaker 01:
Maybe somebody had a mechanics lien or something like that.

[00:14:59] Speaker 01:
Maybe it's all been satisfied.

[00:15:00] Speaker 01:
But as long as that's still there, the title insurance company is not going to insure it.

[00:15:04] Speaker 01:
You can't become a bona fide purchaser for value if you've got something of notice like that unless it's cleared up, right?

[00:15:11] Speaker 02:
To take your example of a mechanics lien, a mechanics lien must be moved upon within six months or it becomes a nullity.

[00:15:18] Speaker 02:
It sits there on the record, but it's without force or effect.

[00:15:22] Speaker 01:
With respect to the property in question.

[00:15:25] Speaker 02:
Yeah, exactly.

[00:15:26] Speaker 02:
It's six months and that's the end of it.

[00:15:28] Speaker 04:
This is perhaps a tertiary issue.

[00:15:34] Speaker 04:
Judge Smith mentioned the long form of BFP bonafide purchaser for value without notice.

[00:15:43] Speaker 04:
What was the value here?

[00:15:45] Speaker 02:
Oh, what's the fair market value?

[00:15:48] Speaker 02:
Well, you mean are we talking about which transaction?

[00:15:51] Speaker 02:
The reason I say that.

[00:15:54] Speaker 04:
So what was the relevant value paid by either your client or the entity your client is claiming was a bona fide purchaser for value?

[00:16:05] Speaker 04:
What was the value?

[00:16:08] Speaker 02:
I don't know because I don't think that there was any expert testimony concerning that.

[00:16:12] Speaker 02:
In the first generation cases,

[00:16:14] Speaker 02:
the banks generally would bring in expert testimony about what the value was.

[00:16:19] Speaker 02:
What was paid?

[00:16:20] Speaker 02:
I don't recall what the payment on that one was, your honor.

[00:16:23] Speaker 02:
I'm sure I understand what your point is.

[00:16:24] Speaker 02:
It's far less than what you would believe is fair market value.

[00:16:27] Speaker 02:
However, the Supreme Court has already mentioned fair market value is a matter of who is willing to pay what at that time.

[00:16:33] Speaker 01:
Thank you, counsel.

[00:16:35] Speaker 01:
All right, we'll now hear from Mr. Johnson.

[00:16:47] Speaker 00:
Thank you, Your Honors.

[00:16:47] Speaker 00:
May it please the Court.

[00:16:48] Speaker 00:
I'm Michael Johnson from Arnold and Porter.

[00:16:50] Speaker 00:
I represent one of the amici, the Federal Housing Finance Agency, and actually the other, the Federal Home Loan Mortgage Corporation, known as Freddie Mac.

[00:16:59] Speaker 00:
With me at council table are counsel for the appellees, David Blake, representing Citi, and Robert Wurbicki, representing Breckenridge.

[00:17:09] Speaker 00:
With consent of the appellees, I'll be arguing, although each is available if the Court has questions.

[00:17:17] Speaker 00:
Little bit of a curveball coming at us from my friend on the other side.

[00:17:21] Speaker 00:
Many of the issues that were the subject of this morning's colloquy were not in the brief.

[00:17:27] Speaker 00:
And just for the record, we'll object that many of those were waived.

[00:17:31] Speaker 00:
The thrust of the argument on appeal here was the bankruptcy, not the notice of default or the default-related correspondence.

[00:17:38] Speaker 00:
Fortunately, it's an academic matter, because whatever the theory of triggering 106-240, it doesn't work.

[00:17:45] Speaker 00:
under Nevada Supreme Court decisions, primarily LV debt and also Kessler as to the bankruptcy.

[00:17:52] Speaker 00:
There are three issues in play, two that the court spoke with my friend about, the ancient lien issue, the bona fide purchaser issue, and then there's an unjust enrichment issue, which we can deal with if there's time left at the end.

[00:18:07] Speaker 00:
The statute that created my client, the Federal Housing Finance Agency, it's called the Housing and Economic Recovery Act of 2008,

[00:18:14] Speaker 00:
is relevant to all three of those issues.

[00:18:17] Speaker 00:
The district court didn't rely on it.

[00:18:18] Speaker 00:
It was only a very, very tiny piece of the briefing in the district court.

[00:18:23] Speaker 00:
But it is available to the court as an alternative ground of affirmance.

[00:18:26] Speaker 00:
And so I wanted to flag that up front.

[00:18:29] Speaker 00:
We, of course, briefed it thoroughly.

[00:18:31] Speaker 01:
The Housing and Economic Recovery Act you're talking about?

[00:18:34] Speaker 00:
Yes, Your Honor.

[00:18:35] Speaker 00:
Yes, we call it HERA, Housing and Economic Recovery Act of 2008.

[00:18:39] Speaker 00:
The court, the broader court,

[00:18:42] Speaker 00:
It has applied it many, many times in what we call the first wave of these cases, which are the ones that arose out of the homeowners association foreclosures where the continued validity of the deeds of trust, including the one at issue here, was litigated.

[00:18:56] Speaker 00:
I want to talk about ancient lean first.

[00:19:00] Speaker 00:
And let me start with HERA.

[00:19:03] Speaker 00:
In the first wave cases, the court held multiple times, as did the Supreme Court of Nevada, that when

[00:19:11] Speaker 00:
The occurrence of some happening coupled with a state statute would extinguish a property interest protected by HERA.

[00:19:23] Speaker 00:
So an interest of an entity in FHFA's conservatorship like Freddie Mac, a provision of HERA 4617J3, 12 USC 4617J3, prevents that from happening.

[00:19:37] Speaker 00:
So when a state statute coupled with some occurrence

[00:19:41] Speaker 00:
would extinguish a protected lien, HERA preempts that and prevents that result.

[00:19:47] Speaker 00:
That's my friend's argument.

[00:19:49] Speaker 00:
That's my friend's argument.

[00:19:51] Speaker 00:
He says some Nevada statute, NRS 106-240, the ancient lien statute, coupled with a real world happening, the passage of 10 years from what he says is a trigger when we'll talk about why he's wrong, would extinguish a protected lien.

[00:20:08] Speaker 00:
Well, under HERA, that can't happen.

[00:20:11] Speaker 00:
That cannot happen under 4617J3.

[00:20:14] Speaker 00:
4617J3, as this court held in Berezovsky, protects conservatorship property interests from a wide variety

[00:20:27] Speaker 00:
of attacks and challenges under state law.

[00:20:30] Speaker 03:
You said the district court did not reach this.

[00:20:32] Speaker 03:
Was this issue briefed fully in the district court?

[00:20:37] Speaker 00:
Not in any detail, your honor.

[00:20:39] Speaker 00:
Hira is mentioned.

[00:20:40] Speaker 00:
Barazowski is cited in the dispositive motions briefing.

[00:20:45] Speaker 00:
So there was our motion to dismiss.

[00:20:47] Speaker 00:
And although my friend Mr. Wright today was suggesting that he didn't have an opportunity to take discovery, he

[00:20:53] Speaker 00:
He filed a motion for summary judgment, so I don't think the court can credit that.

[00:20:59] Speaker 01:
So I understand, so you're answering my colleague's question.

[00:21:02] Speaker 01:
So HERA was discussed at the district court or was not?

[00:21:07] Speaker 00:
It was raised, but only in passing and primarily in the preliminary injunction briefing.

[00:21:12] Speaker 01:
So the district court didn't make it part of its judgment?

[00:21:14] Speaker 01:
District court did not address it.

[00:21:16] Speaker 03:
And it wasn't part of the motion to dismiss briefing?

[00:21:20] Speaker 00:
It was not, Your Honor.

[00:21:21] Speaker 00:
Berezovsky was cited, but for a background proposition.

[00:21:24] Speaker 00:
So the court has ample.

[00:21:26] Speaker 03:
We'd be reaching a, I mean, it is a question of law, but we'd be reaching a wholly new ground that really wasn't engaged in in the district.

[00:21:35] Speaker 00:
I would agree with that.

[00:21:35] Speaker 00:
The court knows it has discretion to do that, because we're the appellees and any ground reflected in the record.

[00:21:42] Speaker 00:
And the facts that are necessary to support it are in the record.

[00:21:45] Speaker 00:
So it's really a pure application of law here.

[00:21:47] Speaker 00:
The court could do it.

[00:21:48] Speaker 00:
And I think the law supports it.

[00:21:51] Speaker 00:
And it could be useful in this burgeoning wave of second wave cases to get clarity on that issue.

[00:21:57] Speaker 00:
But I understand the record is what it is.

[00:22:00] Speaker 00:
On the Nevada law points, my friend at pages 21 and 22 of his opening brief actually

[00:22:12] Speaker 00:
previewed the fact that the Supreme Court of Nevada was looking at the bankruptcy issue and would issue a decision.

[00:22:18] Speaker 00:
He said it was highly probable that the Nevada Supreme Court would provide some relevant guidance here and it did.

[00:22:24] Speaker 00:
It decided Kastler and said bankruptcy discharge cannot make a loan wholly due and Judge Bennett, I think you touched on the reasoning very aptly.

[00:22:38] Speaker 00:
You know, lots of things can happen that

[00:22:41] Speaker 00:
can affect the relationship between the creditor and the debtor.

[00:22:47] Speaker 00:
There can be letters about this bad thing might happen, that bad thing might happen.

[00:22:53] Speaker 00:
But those don't make the loan wholly due for the purpose of this statute, because the purpose of the statute is, as Judge Smith said, to provide clarity not between the borrower and the lender, but to third parties.

[00:23:09] Speaker 00:
potential new purchasers and encumbrances looking at the record to figure out what they might be buying or what priority they might be getting if they lend against the collateral.

[00:23:23] Speaker 00:
So the purpose of 106-240 is to provide clarity.

[00:23:28] Speaker 00:
And the only source of that clarity are the documents in the record.

[00:23:32] Speaker 00:
So all these things that my friend wants to say made the loan wholly due happen outside the record.

[00:23:39] Speaker 00:
Those third parties that the statute was intended to protect, the potential purchasers and new encumbrancers, wouldn't get that clarity.

[00:23:47] Speaker 00:
They have no way of knowing whether the lender sent a collection letter to the borrower.

[00:23:52] Speaker 00:
Now they can see if a notice of default has been recorded, but the Nevada Supreme Court has held that a notice of default isn't sufficient

[00:24:01] Speaker 00:
because the borrower can cure.

[00:24:03] Speaker 00:
LV debt, the Nevada Supreme Court's precedent on point, is very clear.

[00:24:07] Speaker 00:
And in our 28-J letter, to which Mr. Wright did not respond, we quote the Nevada Supreme Court's discussion, a deed of trust can only be presumed satisfied under NRS 106-240 when 10 years have passed after the last

[00:24:25] Speaker 00:
possible date the deed of trust is in effect as shown by the maturity date on the face of the deed of trust or any recorded extension thereof.

[00:24:37] Speaker 00:
Two things.

[00:24:38] Speaker 00:
Two things only.

[00:24:39] Speaker 00:
Stated maturity date, recorded extension.

[00:24:43] Speaker 00:
That's consistent with Cassler, which is an unpublished decision, but makes the same point and they both talk about exactly what

[00:24:52] Speaker 00:
Judge Bennett and Judge Smith were talking about, in terms of the policy, when things can change, we won't get that clarity.

[00:25:00] Speaker 00:
The deed of trust is not old and obsolete.

[00:25:02] Speaker 00:
It's still active and could be enforced.

[00:25:05] Speaker 00:
So whatever might be going on between the lender and the borrower, the rest of the world can only get clarity when the stated maturity date or a recorded extension date occurs.

[00:25:22] Speaker 01:
So basically the record, if it's not in the public record, it doesn't exist for purposes of this issue.

[00:25:28] Speaker 00:
Correct.

[00:25:29] Speaker 00:
That's exactly right.

[00:25:30] Speaker 00:
And that's what the statute says, right?

[00:25:33] Speaker 00:
It says, according to the terms thereof, right?

[00:25:37] Speaker 00:
The NRS 106-240 says, when the debt becomes wholly due according to the terms thereof, meaning the terms of the deed of trust or a recorded extension.

[00:25:47] Speaker 00:
Deeds of trust are recorded instruments.

[00:25:49] Speaker 00:
Recorded extensions are recorded instruments.

[00:25:51] Speaker 01:
Let me ask you this.

[00:25:52] Speaker 01:
as you well know, most of the meat of an agreement with the borrower is in the note, whereas deeds of trust tend to be boilerplate.

[00:26:05] Speaker 01:
There can be lots of peculiar provisions in a note which could arguably have some bearing.

[00:26:10] Speaker 01:
What role, and that doesn't show up in the public record, by the way, only the deed of trust does.

[00:26:16] Speaker 01:
What role, if any, should that play in our review of this issue?

[00:26:20] Speaker 00:
None.

[00:26:21] Speaker 00:
because it's not a recorded instrument, and because the Nevada statute says you look at two things.

[00:26:26] Speaker 00:
The terms thereof, and I won't parse the statute because I think it was written in the 19th century, it's one long sentence, but the thereof is referring to the deed of trust.

[00:26:39] Speaker 01:
So the recorded instrument, which is my understanding as well,

[00:26:43] Speaker 01:
is all that really counts here.

[00:26:44] Speaker 01:
The parties could have agreed whatever they wanted to, but it's the deed of trust that controls.

[00:26:48] Speaker 01:
Yes, absolutely.

[00:26:50] Speaker 04:
It's not entirely clear to me that the Nevada Supreme Court didn't leave open the possibility that there could be something when it said, even if a recording, a notice of default could render a loan wholly due, the one here didn't do it.

[00:27:06] Speaker 04:
And with the caveats they place on that, it may be very difficult

[00:27:09] Speaker 04:
But there's nothing in the opinion which absolutely rules that out for some future case, right?

[00:27:16] Speaker 00:
I think it's judicial modesty on the part of the Nevada Supreme Court just not wanting to decide issues that weren't before it.

[00:27:23] Speaker 00:
I think the language they use elsewhere in the opinion, I would just look at the US Supreme Court.

[00:27:27] Speaker 01:
They could learn some things.

[00:27:30] Speaker 00:
I will pass that along when I'm back in Washington, Your Honor.

[00:27:35] Speaker 00:
I won't read through all the quotations we present in the 28-J letter.

[00:27:39] Speaker 00:
This was no slip of the pen by the Nevada Supreme Court.

[00:27:43] Speaker 00:
They repeatedly made statements that only make sense if the rule is it's the deed of trust or a recorded extension and nothing else.

[00:27:54] Speaker 00:
And so we believe that's what they intended.

[00:27:59] Speaker 00:
Whether the door is open to crack for something else is an academic question here.

[00:28:04] Speaker 00:
What's important is that the events, my friend,

[00:28:08] Speaker 00:
wants to cite to the court.

[00:28:11] Speaker 00:
Pre-default correspondence, notice of default, bankruptcy filings are ruled out.

[00:28:16] Speaker 01:
Is there anything you can think of that would prohibit us or suggest we should not apply LB debt collect to this case?

[00:28:23] Speaker 00:
Only that HERA is preemptive authority, that in some logical sense maybe that comes first.

[00:28:29] Speaker 00:
I understand the court that would require a bit of an exercise of discretion.

[00:28:34] Speaker 00:
But if the court is going to apply Nevada law, LV debt controls here, especially in light of Cassler.

[00:28:41] Speaker 00:
Cassler is unpublished.

[00:28:42] Speaker 00:
It's not binding, but it's carefully analyzed.

[00:28:45] Speaker 00:
It's not a one-line memorandum.

[00:28:47] Speaker 00:
The Nevada Supreme Court thought very carefully about bankruptcy issues.

[00:28:51] Speaker 00:
Mr. Wright agreed at page 21 to 22 of his opening brief

[00:28:54] Speaker 00:
the forthcoming opinion would be significant.

[00:28:57] Speaker 00:
It is.

[00:28:58] Speaker 00:
He now wants to say, oh, that doesn't matter, because that's a discharge case.

[00:29:02] Speaker 00:
And my theory now is petition, although the briefing is a little bit all over the place.

[00:29:08] Speaker 00:
He talks about discharge.

[00:29:09] Speaker 00:
He talks about petition.

[00:29:11] Speaker 00:
It's not perfectly clear that it's one or the other.

[00:29:14] Speaker 00:
It doesn't really matter.

[00:29:15] Speaker 00:
The petition is the opening salvo in a battle that leads to a discharge.

[00:29:24] Speaker 00:
If the thing at the end that the discharge can't possibly have made the loan wholly due, it's really difficult to have any logical chain of thought that could say the thing at the start, the petition somehow could have.

[00:29:43] Speaker 00:
Because the petition is just a vehicle to get to a discharge.

[00:29:48] Speaker 00:
Now, logic problem aside,

[00:29:51] Speaker 00:
he's just mistaken about, my friend Mr. Wright is just mistaken about the effect of anything that happens in the bankruptcy.

[00:29:59] Speaker 00:
Since we're in Las Vegas, I'll put it this way.

[00:30:01] Speaker 00:
The basic rule that comes from the Supreme Court's decision in Johnson and all sorts of cases that follow it can be distilled into what happens in the bankruptcy stays in the bankruptcy.

[00:30:15] Speaker 00:
What happens in the bankruptcy affects

[00:30:18] Speaker 00:
not even the obligation of the debtor to the creditor, it only addresses one channel of enforcement of that obligation.

[00:30:27] Speaker 00:
And the discussion in Johnson is right on point.

[00:30:31] Speaker 00:
In Johnson, the debtor had a debt discharged under Chapter 7, and then, because it was a secured debt, made it part of a Chapter 13 plan.

[00:30:46] Speaker 00:
Now,

[00:30:46] Speaker 00:
If the Chapter 7 discharge had obliterated the debt, it wouldn't have been a claim, couldn't have been brought into the Chapter 13.

[00:30:55] Speaker 00:
But the Supreme Court said it can.

[00:30:57] Speaker 00:
And it can because the Chapter 7 only concerns this one channel of enforcement of the obligation, does not change the obligation, does not terminate other means of enforcement.

[00:31:13] Speaker 00:
And so cases from this court,

[00:31:15] Speaker 00:
cases all around the country make the same point.

[00:31:19] Speaker 00:
Anything that happens in a bankruptcy proceeding, the lender retains all of its rights as against the collateral if they're secured.

[00:31:28] Speaker 00:
Let me touch on BFP or bona fide purchaser for a moment.

[00:31:35] Speaker 00:
It's preempted under HERA.

[00:31:37] Speaker 00:
Again, this court decided as much in the Taoiseach case.

[00:31:40] Speaker 00:
It's also been rejected.

[00:31:41] Speaker 00:
The Nevada Supreme Court looked at this exact argument in a case cited in our brief called TRP Fund.

[00:31:48] Speaker 00:
Twin Rock ignores that case completely.

[00:31:50] Speaker 00:
They have no answer for it.

[00:31:51] Speaker 00:
That's unpublished.

[00:31:53] Speaker 00:
It's unpublished, but it's well-reasoned again.

[00:31:55] Speaker 00:
It's a little shorter, but it does address this exact issue.

[00:31:59] Speaker 00:
This court's duty is, of course, to predict what the Nevada Supreme Court would decide.

[00:32:03] Speaker 00:
It's not only able to look at published decisions.

[00:32:06] Speaker 00:
It can say, in the whole context, this unpublished decision is informative.

[00:32:11] Speaker 00:
What my friend wants to do is apply a doctrine that applies to judicial sales and extend it to other sales.

[00:32:19] Speaker 00:
This was not a judicial sale, this was a private sale.

[00:32:22] Speaker 00:
So the policy rationale for the judicial sale exception is not to protect the buyer, it's to protect the seller in this compelled sale because the court and the parties want the seller to get maximum value.

[00:32:39] Speaker 00:
and you can only get maximum value if the buyer knows it's getting clean title.

[00:32:45] Speaker 00:
And that protects the seller because the seller is an involuntary seller.

[00:32:49] Speaker 00:
The court is compelling the sale at a time and on terms the court agrees to, not the seller.

[00:32:55] Speaker 00:
None of that is present here.

[00:32:57] Speaker 00:
Here, the seller is Twin Rock's predecessor, an entity called Golden Creek.

[00:33:02] Speaker 00:
They chose when to make the sale.

[00:33:04] Speaker 00:
They proposed the terms.

[00:33:06] Speaker 00:
They accepted them.

[00:33:07] Speaker 00:
From the record, to get to Judge Bennett's point, the quit claim deed recites consideration of $1.

[00:33:15] Speaker 00:
$1.

[00:33:16] Speaker 00:
So from the record, we can't say there was any value.

[00:33:20] Speaker 00:
So they don't meet the state law requirements of a bona fide purchaser.

[00:33:23] Speaker 00:
I'm over my time.

[00:33:24] Speaker 00:
I appreciate the court's indulgence.

[00:33:25] Speaker 01:
Any other questions by my colleagues?

[00:33:27] Speaker 00:
All right.

[00:33:28] Speaker 01:
Thank you very much.

[00:33:29] Speaker 01:
Thank you.

[00:33:29] Speaker 01:
All right.

[00:33:29] Speaker 01:
You have a little rebuttal time, counsel.

[00:33:32] Speaker 01:
You don't have to use it, but you're welcome to.

[00:33:38] Speaker 02:
Well, with respect to the heroin argument, again, it was barely mentioned in the district court.

[00:33:45] Speaker 02:
However, this is not a foreclosure, a lien, or a garnishment that we're talking about.

[00:33:52] Speaker 02:
It's basically akin to a statute of limitations, although this is a statute of repose in my opinion, just because it doesn't have to do with an accrual of a cause of action has to do with an event.

[00:34:03] Speaker 02:
And I see nothing with respect to the hair arguments that say that they are not

[00:34:08] Speaker 02:
They're not restricted by applicable statutes, limitations, and whatnot.

[00:34:13] Speaker 02:
There's very little that they need to do to protect their interests.

[00:34:16] Speaker 02:
There's no requirement that they actually conduct a foreclosure in 10 years.

[00:34:20] Speaker 01:
Do you believe that we could, if we needed to, apply HERA even though it was not really processed by the court below?

[00:34:30] Speaker 02:
I think it was mentioned, but it didn't explain how that applied.

[00:34:36] Speaker 02:
There's 2 different things that are going on.

[00:34:39] Speaker 02:
One is Fannie Mae and their amicus brief talking about their general administration of things versus HERA, the foreclosure bar, which was a common thing that was discussed.

[00:34:48] Speaker 01:
I think that's the context.

[00:34:50] Speaker 02:
That's what I'm saying.

[00:34:50] Speaker 02:
That was the context and that has nothing to do with this context.

[00:34:55] Speaker 02:
I'll say one more thing with respect to your question about your comment about deeds of trust and the notes.

[00:35:01] Speaker 02:
Yes, the notes are not part of the record, but they really do contain, for the most part, all of the meat of it.

[00:35:07] Speaker 02:
What if the deed of trust and the necessarily do incorporates the note by reference?

[00:35:11] Speaker 02:
Should we not be also

[00:35:13] Speaker 02:
even though the deed of trust is recorded, it incorporates a note by reference, even though the note is not recorded, should we not be looking at the note as well.

[00:35:19] Speaker 01:
Thank you, Judge.

[00:35:20] Speaker 01:
Any other questions by my colleague?

[00:35:21] Speaker 01:
No.

[00:35:22] Speaker 01:
All right, thanks to counsel for their argument in this case.

[00:35:24] Speaker 01:
The case of Twin Rock Holdings versus Federal Home Loan Mortgage Corporation is submitted.